Netflix downgraded by Wolfe Research amid engagement concerns

Wolfe Research has downgraded Netflix from ‘Outperform’ to ‘Peer Perform,’ citing concerns over whether increased content spending effectively drives viewer engagement. Analyst Peter Supino estimated that engagement in the U.S. and Canada may be flat or declining in the first half of 2026.

Key factors contributing to the downgrade include a projected $3 billion increase in content expenses over two years and a perceived shortage of major new hits. While Netflix’s global viewing total rose 2% to over 97 billion hours in the first half of the year, analysts noted difficulty in sustaining viewership for major titles, with the final season of ‘Stranger Things’ noted as an exception.

Competition also remains a significant factor. Data indicates YouTube holds a 14.2% share of U.S. TV viewing compared to Netflix’s 7.8%, alongside increased spending from rivals such as Amazon, Apple, Disney, and HBO. Consequently, Wolfe Research lowered its 2027 revenue estimate to $56.27 billion and reduced its earnings per share forecast.